Singapore's China Conundrum

The city-state might have badly miscalculated by tilting too close to the United States at China’s expense.

By Michael Tai for The Diplomat

December 13, 2016

Singapore’s relations with China have taken a plunge in 2016. First, the Chinese were irked by Singapore’s support for the South China Sea arbitration ruling in July and then by Singapore’s alleged attempt to include a mention of the ruling in the final document of the Non-Aligned Movement (NAM) summit in Venezuela in September. In a very public spat, Singapore’s ambassador, Stanley Loh, denied raising the South China Sea issue while Chinese Foreign Ministry spokesman Geng Shuang insisted that “a certain nation” had tried to trip China up at the summit. Then, in November, Hong Kong customs impounded nine Singapore Armed Forces armored personnel carriers in transit from Taiwan.

Since establishing diplomatic relations in 1990, Singapore and China have developed strong trade, finance, and investments links. Trade and investment ties between the two countries grew steadily over the years, and China became Singapore’s largest trading partner in 2014, with bilateral trade in goods reaching $86 billion. In 2013, Singapore’s investment in China reached $7.23 billion, making it China’s largest investor. Remarkably, the city-state is China’s top investment destination in Asia as well.

But Singapore has cultivated strong economic and security links with the United States too. The United States is Singapore’s second most important trade partner after China. The city-state has also attracted major investments from the United States due to open-door investment policies and highly developed business infrastructure. More than 1,300 U.S. companies have invested in Singapore, and over 300 have set up regional headquarters there. Meanwhile, U.S.-Singapore security ties date back to the 1960s, when Singapore actively supported America’s war effort in Vietnam.

The island state is sandwiched between much bigger neighbors, Malaysia and Indonesia, and there were fears too of communist North Vietnam and China. The communist victories in Indochina in 1975 and Vietnam’s invasion of Cambodia in 1978 reinforced Singapore’s view that the United States should play a role in Southeast Asian security. Lee Kuan Yew, Singapore’s first prime minister, understood the importance of having “overwhelming power on its side.” Because of her limited strategic space, Singapore has looked to the United States as a security guarantor, although that is not officially acknowledged.

Following China’s reform and opening to world trade in 1978, however, few Singaporeans still think of China as a communist threat. Since Deng Xiaoping’s visit to Singapore in 1978, Chinese leaders have looked upon Singapore as a successful development model. Lee was an “old friend” of the Chinese and was widely respected in China. The Chinese sense kinship with Singaporeans, 78 percent of whom are of Chinese descent, and admire Singapore’s blend of authoritarian state-capitalism, its low crime, and high standard of cleanliness. Deng welcomed Lee’s counsel and the prestigious Lee Kuan Yew School of Public Policy has since trained many cohorts of Chinese officials in the art of public administration. To offset a notoriously low birth rate, the Singapore government has encouraged immigration from China, and of the nation’s 5.2 million people today, one million are recent Chinese immigrants. With keen strategic instincts, Lee Kuan Yew deftly balanced relations with the West and China. Beijing has been sympathetic to Singapore’s security needs and accepted the rationale behind her military ties with the United States and Taiwan; although Singaporean troops have been training in Taiwan since 1975, Beijing made no fuss until now.

Despite her Western-leaning position, Singapore has avoided taking sides with the United States in a conflict with China. Things changed in the wake of President Barack Obama’s ‘Pivot to Asia’ since 2011, which entailed moving 60 percent of U.S. naval forces to the Asia-Pacific and the creation of a 12-nation trade pact called the Trans-Pacific Partnership or TPP that excludes China. Singapore has been an enthusiastic supporter of the ‘Pivot.’ In 2012, the United States announced that it would deploy littoral combat ships to the city-state as part of the pivot. During his state visit to Washington in August, Singaporean Prime Minister Lee Hsien Loong hailed Obama as America’s first “Pacific president” and said at a White House press conference that he hoped Congress would ratify the TPP.

These statements riled up observers in Beijing, but things came to a head a month later when the Singapore delegation to the Non-Alignment Movement Summit allegedly pushed to include a reference to The Hague ruling on the South China Sea in the summit’s final document. In July, after The Hague tribunal at the Permanent Court of Arbitration rejected Chinese claims in the South China Sea, Prime Minister Lee had voiced support, declaring that the verdict delivered a strong statement about international law in maritime disputes. Singapore reportedly attempted to also highlight the ruling, which China has dismissed as invalid, in the NAM summit statement. Since Singapore is not a claimant in the South China Sea disputes, the NAM episode provoked alarm among Chinese officials who now saw Singapore going out of her way to oppose China. The subsequent impounding of the armored vehicles in Hong Kong rattled many Singaporeans and left them questioning their prime minister’s strategic judgment.

Singapore’s prosperity has long been founded on her role as a free port on the Straits of Malacca, the 900 km long waterway that links Asia with the Middle East and Europe, and carries about 40 percent of the world’s trade. More than 50,000 merchant ships ply the route each year. When the British first arrived to set up a trading post at the beginning of the 19th century, there were barely a thousand people living on the island. Today it is the world’s second busiest port after Shanghai by cargo tonnage, and has earned praise as a sophisticated financial and trading center with one of the highest wealth and income levels in Asia.

In much the same way, the South China Sea is critically important to China’s development. China’s economy is heavily dependent on trade, the bulk of which passes through the South China Sea, and freedom of navigation on those waters is crucial. Eighty percent of China’s crude oil imports come through the Straits of Malacca, a choke point that the U.S. Navy could easily constrict. It is not hard to see why Beijing regards the South China Sea as a core national interest. To diversify risk, the Chinese have sought alternative routes to the Indian Ocean. There were discussions about opening a canal on the Kra Isthmus in southern Thailand to join the Indian Ocean with the South China Sea, but talks have not borne fruit.

Meanwhile, plans for a land route from southwest China over Myanmar to the Bay of Bengal have been stalled by policy changes in Myanmar. But in November, there came two low-key announcements which may have long-term impact on Singapore. First, Pakistan announced the opening of Gwadar Port, the southern terminus of a corridor of roads, railways, and pipelines linking the city of Kashgar in China’s western Xinjiang province to the Arabian Sea. When completed, the corridor will bypass the Straits of Malacca and cut the journey from China to Europe from 45 to 10 days. A second announcement concerns a Sino-Malaysian venture to build a mega port in Malacca that could supplant Singapore. The port will be connected by a new railway across the Malay peninsula to the South China Sea, again circumventing Singapore. The two projects are part of China’s “One Belt, One Road” initiative, which promises to reshape the political and economic landscape of the region and beyond.

Lee Hsien Loong may have underestimated the importance China places on the South China Sea. By tilting toward the United States, he may have put his country at risk. Singapore has been unique among ASEAN states in that it enjoyed a special relationship with Beijing, one carefully nurtured by Lee Kuan Yew and Chinese leaders since Deng Xiaoping. Because of a common cultural heritage, the Chinese feel greater affinity to Singapore than any other Southeast Asian state and Chinese diplomats often look to Singapore to help convey their views within ASEAN. That trust has been compromised, and other states such as Malaysia and the Philippines may now be seen as better partners. Lee Hsien Loong put his reputation on the line when he chose to support the TPP and the South China Sea ruling. The TPP is now dead in the water without the United States, and Manila — Washington’s strongest Southeast Asian ally that initiated the South China Sea arbitration — has turned and embraced Beijing.

The irony is not lost on Singapore’s citizens. The city-state may yet prove able to weather recent diplomatic reverses, but Singapore can ill afford to misread long-term geopolitical trends in Asia.